Costco’s mission: “To continually provide our members with quality goods and services at the lowest possible price” directly reflects upon its business model to produce high sales volumes and swift inventory turnover through the use of low prices on a wide range of select merchandise (p. 217). Costco manages to operate with high profitability within lower gross margins due to its high volume purchasing, efficient distribution, and reduced handling of merchandise in no-frills, self-service warehouse facilities (p. 217). Costco, like…
As we look at our current economical status, we see how the global financial market is in turbulence due to changes in demographics. To subdue these changes Costco has constantly tried to pull in and retain customers. This allows them to keep a strong position in market share and acquiring profits. Costco is in the membership wholesale industry that provides merchandize at a much lower price than others. Although Costco is one of the biggest companies in the USA, there are many strengths and weaknesses in their strategy. Taken that Costco has many competitors, it must continue to respond to industry pressure through innovation. Considering the many accomplishments of Costco, there are many things they can improve on. Increasing profitability…
As of 2005 research demonstrates that Wal-Mart was unstoppable and created strife for small local businesses and destroyed many small businesses. Wal-Mart is an unstoppable force and revenues of $247 billion with a growth of 15% a year. Wal-Mart is known to drive companies like Kmart to bankruptcy. Enter Costco that is the competitor that has shaken Wal-Mart’s reigning posture and caused a stir in businesses processes. Costco’s is approximately 30% the size of Wal-Mart and Costco competes against Sam’s approach to bulk sales. Sam’s has had quit the strife among battling for a top position. During the past 20 years Sam’s has had more than 5 CEO’s and has incorporated many strategies in order to try to gain control of top business command. All these ploys have been smothered by Costco’s array of visual space and prestigious options. Consider some figures. Sam's Club has 71% more U.S. stores than Costco (532 to 312), yet for the year ended Aug. 31, Costco had 5% more sales ($34.4 billion vs. an estimated $32.9 billion). The average Costco store generates nearly double the revenue of a Sam's Club ($112 million vs. $63 million), (Helyar,…
The first one is Costco, a wholesale corporation. Its competitive advantage is its strong business model in which Costco focuses on having low operating costs by buying only a few brands of each item from producers in bulk and relying on word of mouth advertising. They pay employees well which ensures efficiency through retention. Finally, they reward loyal consumers the more they purchase, which entices them to buy more. Costco actually makes its money through membership fees, which are steady and therefore safer in the future. Loyalty is especially important in today’s day and age because there are so many competitors that only companies loved by customers will survive. To ensure safety, Costco is diversified among three main categories, consumer services, insurance services, and business services, which can be broken down further. It not only has loyal customers, but loyal investors as its debt to equity ratio is 59.42, much less than the leading wholesale company Walmart, with a debt to equity ratio of 63.49. It has so many investors that it has a market cap of 71.36 billion dollars. Although Costco is very popular among its customers and investors, it still has a P/E ratio of 29.88, which is less than its industry. Costco makes good use of its money and has a return of equity ratio of 20.63%, more than Walmart with a ratio of 18.62%. Costco will likely never go out of business because it sells items that people need: food, water, clothing, and shelter, and because of its affordable prices, loyal customers, and tight economy, its products will be in demand. It is based in the US, which has a strong economy as revealed by the Fed, and does not have to worry about problems faced in the EU and China such as the devaluation of the yuan. The persistent management is taking advantage of this as Costco grows across the…
Costco is known for only carrying products of superior quality; on the other hand, Wal-Mart is known for carrying cheap products. They must try not to relate Sam’s Club with Wal-Mart, as Sam’s Club needs to have more of a Costco reputation than Wal-Mart. If it can be established in the consumer eye that Sam’s Club is superior to Costco in price and quality, there is potential to improve their future development.…
The problem facing Costco these days is complaints by customers that they want some items sold individually because some customers don’t want to buy four bottles of ketchup at once. The research questions for Costco are will it provide items individually to customers, Is it profitable for Costco to sell some items individually, and how much business will not providing items individually to customers affect Costco’s revenues. This research is critical to Costco’s future and how it will change in the future to increase profits and maintain its current customers and also gain more customers that don’t shop at Costco because they are seeking a store that meets their needs of buying items individually.…
The Warehouse Club Industry. (2004). Black Book - Turf Wars: Real Estate Dynamics in Broadlines Retail, 55-81. Retrieved from EBSCOhost.…
Costco Wholesale Corporation Costco Wholesale Corporation - Financial and Strategic Analysis Review Publication Date: 27-Mar-2013 Reference Code: GDRT28577FSA Company Snapshot Company Overview Key Information Costco Wholesale Corporation (Costco) is membership warehouses chain operator. The company's product portfolio includes sundries, hardlines, food, softlines, fresh food and ancillary. It offers two types of memberships, namely, business and gold star to its customers. Costco operates gasoline stations in the US and Canada.…
Costco’s business model is focused on producing high sales volumes and rapid inventory turnover by offering members low prices on a limited selection of national name brands and select private-label products in a wide range variety. Costco is focused in low-cost strategy is concentrated on a narrow buy segment and out competing rivals by having lower costs, therefore being able serve a niche consumers at a lower price. (Gamble, John and Thompson, Arthur (2009).…
Canada is a country built on immigration, mainly British at first, but from all over the world afterwards. Chinese immigration to Canada dates back to the period of the gold rush when they were recruited to mine. In the 1880's, the Chinese population increased after Canada joined the confederation and extra labour was required to build a cross-country railway. Due to the poor economy in China, many Chinese were willing to migrate and work for low wages. The Canadian government seized this opportunity and allowed the companies working on the Canadian Pacific Railway (CPR) to import Chinese immigrants. With a drive for completion a significant number of Chinese were recruited. In order to control this increase in immigration, the Canadian government implemented a policy imposing a head-tax on Chinese immigrants entering Canada. The head-tax was a discriminatory piece of legislation, which was enacted by the government due to public pressure, and which led to severe discrimination of the Chinese people, thus violating present day human rights codes.…
In conclusion, you new age business model is marveled and should be applauded. If there were more companies like Costco around America would be a better place, where its citizens would be happy and people would be able to live more prosperous, productive, and happier lives.…
This report provides a financial quarterly trend analysis for Costco Wholesale Corporation, Inc. founded in 1983. Costco Wholesale Corporation is the seventh largest retailer company in the world. As of July 2012, it was the fifth largest retailer, and the largest membership warehouse club chain in the United States ("Wikipedia, the free," 2011). Costco Wholesale Corporation’s stock is publicly traded on the National Association of Securities Dealers Automated Quotation (NASDAQ) under the symbol “COST”, which I will use as reference throughout this report.…
Bibliography: Cascio, Wayne F. "Decency Means More than "Always Low Prices": A cojparions of Costco to Wal-Mart 's Sam 's Club." Academy of Management Perspectives (August 2006): 26-37.…
The current economy is showing substantial declines in consumer durable spending as people defer such purchases as furniture and large appliances. In addition, according to the MasterCard financial report for May 2010, purchases of apparel have declined 6% for women and 10% for men with marginal increases for children’s apparel. The product categories for these two types of products encompass 29% of Costco’s business. Even though Costco is showing only a 3% decline this month over the same month in 2009, it is a worrying trend. They are, however, making up ground in products that tend to be more recession proof such as fine wines, snack foods and tobacco.…
In this paper you will read about how Costco uses effective leaders within its company to empower their employees and create a working environment that is enjoyable. This paper will aim to answer three questions: 1.) How does the flexible leadership theory apply to Costco’s operations? 2.) What is the CEO’s role in all of this? 3.) Can this work in your organization? If not, why?…